Budget data for January-February 2017

9th March 2017

Bottom line: The fiscal year has got off to a good start, with the twelve-month trailing (TTT) deficit/GDP ratio remaining at a very low 2.1%. Tax receipts are continuing strong, although vehicle sales have plunged. Spending is contained, except in the defence sector.

Specifics:

  • The budget deficit in February was NIS2.9bn, so that after two months the net surplus is NIS1.3bn, very similar to the situation in 2016, which saw a surplus of NIS1.4bn after two months.
  • In terms of GDP, the deficit for the 12 months ending in February was 2.1%, maintaining the very low level of January and compared to a target of 2.9% for full-year 2017.
  • Supporting this strong performance was the continued strength in tax receipts, especially direct taxes.
  • Total revenues from direct taxation for February, after taking into account changes in rates, were up by 10.6% over February 2016. Income tax receipts from corporations and self-employed rose 10% and from salaries by 13%.
  • Taxes on real estate were slightly up, while the increased activity on the stock exchange generated a sharp rise in capital gains tax receipts.
  • Indirect taxes were also strong, with an overall increase — adjusted for changes in rates — of 8.8%.
  • However the detailed picture was more mixed, with VAT receipts up by 10%, thanks to VAT payments on the flood of cars imported in December and delivered in January — with the VAT on them paid in February.
  • Meanwhile, car sales have plunged in the new year, pulling down revenues from import purchase tax by 24%, with import tax on cars plummeting 42%.
  • Spending by all government ministries in January-February totaled NIS43.3bn, an increase of 9.4% over the parallel period in 2016.
  • Spending by civilian ministries rose by only 5.2%, compared to a budgeted rate of increase of 8.9% for the full year.
  • In sharp contrast, the defence sector spent 23.9% more than in the first two months of 2016, although its spending is budgeted to rise by only 0.9% in 2017. The Treasury claims this early surge in spending is not indicative of the whole year — which is plausible, given that some defence spending involves large purchases overseas. However, this critical and often troublesome area will need to be watched carefully as the year develops.

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